State Rundown 8/8: States Setting Rules for Upcoming Tax Decisions

August is often a season for states to define the parameters of tax debates to come, and that is true this week in several states: a tax task force in Arkansas is nearing its final recommendations; residents of Missouri, Montana, and NorthCarolina await results of court challenges that will decide whether tax measures will show up on their ballots this fall; and Michigan and South Dakota are taking different approaches to making sure they’re ready to collect online sales taxes next year.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

Major State Tax Proposals/Developments:

A legislative task force in Arkansas is closer to finalizing its recommendations for reforming the state’s tax system after voting on what personal and corporate income tax provisions to advance in its report. Among the actions taken, lawmakers voted to consolidate income tax tables while cutting the top marginal rates, rejected a proposal to adopt a state EITC, approved lowering the corporate income tax rate, collecting sales taxes from remote sellers, eliminating the complete capital gains exemption for gains over $10 million, and indexing motor vehicle taxes to the costs of construction. — LISA CHRISTENSEN GEE

2018 Ballot Measures and Court Challenges:

The lobbying arms of major tobacco companies are funding a legal challenge to the wording of a ballot initiative in Montana. The initiative would raise the state’s tobacco taxes to fund the extension of Medicaid expansion. The latest effort to defeat the measure challenges the 135-word ballot statement as confusing and inaccurate, asking for an order that the Attorney General be required to change the language.

The proposed constitutional amendment to lower North Carolina’s income tax cap to 7 percent, along with other amendments, has been jointly challenged by the NAACP and Clean Air Carolina.

Although the state doesn’t have an economic nexus statute on the books, in response to the Supreme Court’s Wayfair decision the Michigan Treasury has issued via administrative guidance that it will be requiring sales and use tax collection and remittance by qualifying sellers effective October 1.

State Roundup:

States including Kansas and Texas are enjoying higher than anticipated revenue performance in the new fiscal year, thanks in large part to the reversal of harmful tax cuts in the Sunflower state and oil and gas receipts in the Lone Star state.

An Oregon law that earmarked revenue from privilege taxes on vehicle sales to fund rebates on the purchase of zero-emission vehicles survived a recent court challenge as the Oregon high court found that it didn’t unconstitutionally divert money from the Highway Fund.

A group in Nebraska will now attempt to put a constitutional amendment on the 2020 ballot to create an income tax credit for 35 percent of property taxes paid, after efforts to do so through the legislative process and a ballot initiative both stalled.

What We’re Reading…

The Wall Street Journal points out a finding in NewJersey that others have long noted and all states should take heed of: business tax subsidies awarded in New Jersey are more likely to be sold to other companies than used to reduce taxes for the companies they are awarded to, highlighting the fact that state and local taxes are rarely a determining factor for business location and expansion decisions, and these sorts of subsidies are essentially cash hand-outs to corporations already paying minimal taxes.

The New York Times reports that details of cities’ tax subsidy offers for Amazon’s HQ2 project are often kept secret from residents and even city officials.

Bloomberg Law notes that while several states are putting in place laws necessary to allow and tax now-legal sports betting, none should expect a major revenue boost.

Governing writes that local governments are increasingly procuring supplies through Amazon Business, and that this trend worries watch-dog groups who note that the company is able to corner the market and force favorable terms that do not necessarily produce savings for the buyers.

The ratings agency Fitch reports that while state revenues are up temporarily, the outlook going forward is uncertain and likely volatile.

The Oregon Center for Public Policy’s Daniel Hauser explains the relationship between property tax limits and challenges with funding local government services.

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